Insolvency, Crypto-Assets And IBC: Why India Needs A Control Centric Resolution Framework
- IJLLR Journal
- Feb 7
- 1 min read
Niyati Priyadarshini, KIIT School of Law, KIIT Deemed to be University
ABSTRACT
Indian insolvency law assumes that control over assets can be transferred through legal authority and institutional intermediaries. The presence of crypto assets creates problems for this assumption. The Indian legal system establishes recognition of digital assets for taxation and enforcement purposes yet insolvency law lacks a framework which enables legal recognition to be transformed into actual control and asset valuation and preservation. The blog evaluates IBC asset-centric design through its examination of crypto case failures which demonstrates structural deficiencies that require insolvency governance systems to shift their focus from classification to control.
Introduction: When Insolvency Meets Code Without Custody
The Indian insolvency law system enables financial distress resolution through three processes which give authorities complete control over operations and protect business value while distributing financial responsibilities to different stakeholders. The presence of crypto assets hinders the achievement of all three goals. The insolvency and bankruptcy code of 2016 IBC permits crypto assets despite its design which depends on intermediary systems together with registries and physical asset control to operate. The ownership structure of crypto assets enables their existence without physical boundaries or permanent storage locations or methods to revert to previous states. Between 2021 and 2025 academic commentary together with industry analysis and enforcement actions reached one conclusion about crypto assets which demonstrates a legislative deficiency of insolvency law assesses control through a structural framework. The IBC currently functions through an asset-based system which fails to meet digital asset requirements because it needs to change into a control-based system for effective operations.
